January 4, 2005


Hail Estonia!: But America drops out of the top 10. (MARY ANASTASIA O'GRADY
Tuesday, January 4, 2005, Wall Street Journal)

For the first time in the 11 years that the Heritage Foundation and The Wall Street Journal have been publishing the Index of Economic Freedom, the U.S. has dropped out of the top 10 freest economies in the world.

In 1998, the U.S. was the fifth freest economy in the world, in 2001 it was sixth, and today it sits at 12th, tied with Switzerland. The U.S. drop in ranking is explained in part by a slightly lower score, but mostly by the good performance among its competitors. The lesson? Stand still on the highway to economic liberty and the world will soon start to pass you by.

The 2005 Index, released today, ranks Hong Kong once again as the world's freest economy, followed by Singapore and Luxembourg. But it is Estonia at No. 4 that makes the point. This former Soviet satellite is a model reformer, setting the standard for how fast countries can move ahead in the realm of economic liberalization. Ireland, New Zealand, the U.K., Denmark, Iceland, Australia and Chile, all relatively recent converts to free markets, also outpace the U.S. this year.

The most notable similarities here are the fact that 7 of the 12 (forgetting Switzerland) are or were British and, with the exception of Britain and America, they're all quite small in terms of population, with 7 being islands to boot. This illustrates how ill-considered European Union is and suggests the U.S. would be well-advised to consider gradual deagreggation over the coming century as it doubles in size.

Posted by Orrin Judd at January 4, 2005 4:20 PM

Instead of de-aggregation, how about federalism?

Posted by: pj at January 4, 2005 4:22 PM

The Anti-Federalists were right--federalism can't work.

Posted by: oj at January 4, 2005 4:25 PM

The greatest limit to economic freedom in the US comes not from the Feds but from local and state government. You truly cannot believe the level of stupidity and venality that one sees in Trenton or Albany. Baton Rouge must be frightening.

If we eliminated state regulation of banking, insurance and securities, we'd go a long way to enhancing freedom and competitiveness without harming the consumer one bit. In fact, shutting down the NJ Department of Banking and Insurance would probably enhance consumer protection. There simply is no good reason for these industries to be subject to the whims and caprices of 51 local governments that for the most part don't have a clue and wouldn't know where to buy one.

Posted by: Bart at January 4, 2005 4:40 PM


Federalism would work if the constitution were adhered to. Preserve, protect and defend the constitution is the oath of office at the federal level. The oath of office has been reduced to meaning nothing, mere words. The answer to the anti-federalist concerns was the bill of rights, talk about meaningless. 20 percent of the first 10 amendments have been reduced to nothing (I don't recall the states voting) the rest have been transformed or deconstructed to mean whatever a growing oligarchy says they mean. Institutionalized, statist insanity. Few on this blog can even agree as to the meaning of the 1st amendment. After 218 years one would think we might be past this crap.

Posted by: Tom C., Stamford, Ct. at January 4, 2005 4:55 PM


It's not.

Posted by: oj at January 4, 2005 5:03 PM

It will be interesting to see where Estonia appears on this list in the next couple of years as it becomes fully integrated into the EU.

Also, aren't Denmark and Ireland a couple of countries that have resisted full integration? I know Denmark doesn't use the Euro ,for example. Which makes Luxembourg the only real outlier of the 12 or 13 at the top of the list.

Posted by: Raoul Ortega at January 4, 2005 6:34 PM


Obviously. What is the altermative,the Articles of Confederation? Mob Rule? Oligarchy? The republic will devolve into tyranny, like all that came before. It has been interesting to observe and should continue to be.


The EU is a joke. Either it forces reforms oriented toward economic reality or it becomes a statist mess. Place your bets!

Posted by: Tom C., Stamford, Ct. at January 4, 2005 6:38 PM


Yes, the Articles were a plausible alternative.

Posted by: oj at January 4, 2005 6:49 PM


The cold war could not have been won by a nation organized under the articles of confederation. Read the 14th amendment in conjunction with the 9th and 10th. There is absolutely nothing stopping the courts fromdoing that except exceedingly weak precedent and the statist mindset which infected the world during the last century. The justification for doing otherwise is rationalization, ivory tower obliviousness.

Posted by: Tom C., Stamford, Ct. at January 4, 2005 7:06 PM


Yes, not getting involved in the wars of Europe would be an important feature.

Posted by: oj at January 4, 2005 8:43 PM


You don't buy the argument from the Federalist that the states would have been forever at war had they not united?

Posted by: Matt Murphy at January 5, 2005 2:47 AM

Isn't Switzerland's constitution basically a copy of the U.S.? I don't think you need to toss it out of the mix.

Posted by: Randall Voth at January 5, 2005 6:31 AM

The U.S. could evolve to 3 to 5 sovereign states
with a common defense and trade pacts.

Posted by: J.H. at January 5, 2005 8:56 AM



Posted by: oj at January 5, 2005 10:24 AM


The civil war began under the constitution as slavery was being transplanted to the western territories. Do you honestly think that open warfare between the land hungry states would not have been worse, since the outcome would have been less decisive, under the Articles? The potential for more independent states would have lead to more European alliances, slavery or Jim Crow could still be the law of the land in some areas. France, Spain and Russsia might be North American powers to this day.

Posted by: Tom C., Stamford,Ct. at January 5, 2005 12:46 PM

More independent states would have been good.

Posted by: oj at January 5, 2005 1:01 PM


That is what the constitution was supposed to accomplish, it's called Federalism. A strong central authority with the power to tax indirectly and resposnsiblity for the defense of the whole while presiding over and maintaining a huge free and open market. The states were the labratories for the science of political theory not the central authority. The constitution is clear, to prtetend otherwise is sophistry. Promotion of the "general welfare" does not mean the acceptance of the Marxist theories regarding re-distribution of property enforced by a federal police power and justified through class antagonisms. The federal constitution cannot prohibit such experimentation to the states although it is clearly prohibited from promoting such policies for itself.

Posted by: Tom C., Stamford,Ct. at January 5, 2005 1:35 PM

Tom, much,if not all, of the current state regulation exists solely to protect local commerce at the expense of both consumers and larger entities. The economy is definitely hurt by the myriad of local regulation which financial entities and others must comply. Is there any good reason why Wal-Mart is being obstructed by local government?

It seems to me that the entire rationale for the Commerce Clause is the fact that some industries require being regulated by Federal Law only, and should not be affected whatsoever by state reg. Banking, insurance and securities are precisely in that category.

Posted by: Bart at January 5, 2005 2:09 PM


Bad state policy used to be localized. Since the constitution has been abandoned, all of the worst policy that can be seen at the state and local level has become, to a great extent, the policy of the feds. Federalism remains, to some measure, in the relative liberty afforded in some states over others although the threshold has been conssitently lowered through the national regualtory state. Give it time and the entire nation will be one big New Jersey.

Posted by: Tom C., Stamford,Ct. at January 5, 2005 4:09 PM


Yes, the Constitution didn't work. The Anti-Federalists were right.

Posted by: oj at January 5, 2005 4:13 PM

American banks and insurers cannot compete with the banks and insurance companies of many foreign countries, particularly Japan, Germany and Britain, because of state banking and insurance regs which restrict their size or their right to enter the local market. We don't have national banks in the same way that in France, every grubby little town has a Credit Lyonnais and/or a Credit Agricole. You don't find Nations Bank or Citibank everywhere. Because of these strictly political limitations, they can't provide loans or coverage in the dollar volume of their foreign competitors.

Long before the US got transformed into NJ, I would imagine that Florida, North Carolina, and Texas would have gone to the mattresses. The national regulatory state would force businesses to think 'nationally' that they damn well better keep an eye out on what Washington is doing. It is a lot easier to just watch Washington than it is to watch Washington and Trenton. If businesses didn't have to deal with state nitwittery(nitwitness? nitwitdom?), they could focus on preventing Federal-level stupidity. No more wailing about spotted owls or putting coyotes and wolves on lands where they can eat ranchers' livestock and progeny. Moreover, venal local governments wouldn't be able to keep Wal-Mart from committing heinous crimes like bringing value to consumers.

Posted by: Bart at January 5, 2005 4:31 PM


It's the local, short-sighted gentry whofight against Wal Mart.The only propert rights they value are their own. Easy enough to remedy at the local level. No one, excepting "liberals', believe that politics shouldn't be messy. Callyour local or state rep and bitch, they hear you. The squeaky wheel gats the grease. Call the EPA and bitch and listen to them laugh.

Posted by: Tom C., Stamford, Ct. at January 5, 2005 5:15 PM